According to the preliminary statistics released by GeoStat, Georgia’s real GDP growth was 4.5% year over year (y/y) in Q2 2019, which fell slightly below the 4.8% growth predicted by ISET-PI’s GDP forecast from July. As economic growth constituted 4.9% y/y in Q1, the Georgian government’s 4.5% target of real GDP growth for 2019 does not seem overambitious.

The economic growth in Q2 2019 was mostly driven by stronger external demand, which stimulated net exports of goods and services. Raised remittances also positively affected the economy, however, an extremely low level of foreign direct investment (FDI) drove down GDP growth in the reported quarter. Accelerated fiscal spending, moderate growth of credit activity, and consumption were the internal drivers of growth, while deteriorated business sentiments and a decreased level of investment hindered economic growth in the second quarter.

According to Geostat’s rapid estimates of GDP growth, Georgia’s economy continues expanding at a moderately high pace, reaching 4.7% in the first quarter of 2019. Geostat’s Q1 growth figure fell below the National Bank of Georgia’s (NBG) 5% projection for annual growth in 2019. Meanwhile, based on the March data, ISET PI’s annual GDP growth forecast was 4.9%.

The main external driver of GDP growth in the reporting period was increasing net export, while remittances from abroad and tourism inflows had a limited impact in Q1 2019. Fiscal stimulus was the main internal factor which accelerated the economy, while deteriorating business sentiments and the new wave of credit regulations had a negative impact on growth. The further worsening of the economic situation in Turkey caused by currency crisis and political instability is the main potential risk for economic growth in 2019, transmitting through the trade, remittances, and tourism channels.